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Why Are Mothers Working Longer Hours in Austria than in Germany? A Comparative Microsimulation Analysis *
Author(s) -
Dearing Helene,
Hofer Helmut,
Lietz Christine,
WinterEbmer Rudolf,
Wrohlich Katharina
Publication year - 2007
Publication title -
fiscal studies
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.63
H-Index - 40
eISSN - 1475-5890
pISSN - 0143-5671
DOI - 10.1111/j.1475-5890.2007.00064.x
Subject(s) - microsimulation , economics , labour supply , german , labour economics , order (exchange) , eu countries , personal income tax , demographic economics , tax reform , state income tax , public economics , gross income , european union , international economics , geography , archaeology , finance , transport engineering , engineering
Labour force participation rates of mothers in Austria and Germany are similar; however, full‐time employment rates are much higher among Austrian mothers. In order to find out to what extent these differences can be attributed to differences in the tax‐transfer system, we perform a comparative microsimulation exercise. After estimating structural labour supply models for both countries, we interchange two important institutional characteristics of the two countries ‐ namely, (i) the definition of the tax unit within the personal income tax and (ii) the parental leave benefit scheme. As our analysis shows, differences in mothers’employment patterns can partly be explained by the different tax systems: while Germany has a system of joint taxation with income splitting for married couples, Austria taxes everyone individually, which leads to lower marginal tax rates for secondary earners than in the German system.